Trading Plan for March 2, 2012

Economic Reports Due out (Times are EST): None

Premarket Update (Updated 8:30am eastern):

• US Futures are down moderately.
  
• Asian markets saw gains of 0.8%. 
  
• European markets are trading -0.3% lower at the moment.
  

Technical Outlook (S&P):

• Yet again, the 10-day moving average held for the S&P as the index closed at new recovery highs. 
• Volume was less than yesterday’s spike but still remained at average
• All existing uptrends remain firmly intact. 
• 10-day moving average is in play today at 1366. The 20-day MA could be as well on any descent selling at 1356. 
• Key for the bulls, at a minimum is to consolidate above 1370 which represent strong price level support and where we made new recovery highs. 
• Divergence in VIX as it is showing relative strength against the S&P making new highs of late (inversely correlated)
• 30-minute chart on the S&P still looks healthy with uptrend still in place. 
• We’ve yet to see a sell-off this year that exceeded 1% to the downside. 
• 1370, when looked through the prism of a 15-year chart, represents a very strong price level where markets have historically reversed at. 

My Opinions:

• Market continues to show the desire to self-correct, but the dip-buying mentality in this market has prevented any such action from occurring. 
• For more than 10 years, the first two weeks of March have been horrible for the bulls – seeing strong sell-offs (with the exception being 2010 and the second week of 2009). Second half of the month has fared much better. It is an incredible phenomenon.
• Bears tend to perform the best when they don’t have to hold a gap down, and instead work with a flat or slightly positive open. Today you have the gap-down, which will no doubt will see an attempt to buy the gap very soon after the opening bell. 
• Never find yourself comfortable with profits on the short side, particularly when the market is trading in your favor, because the market continues to buy the dip at every junction. It’s the surest bet in the market right now. 
• Market appears sluggish to me. I don’t consider it consolidation, because it is still marching higher, but the intraday action in doing so, appears to be listless and with less conviction than before. 
• I’m using January-February of last year as my analogue for trading this market – price action is nearly identical, as is the time frames too. With that being said, it is likely we see a pullback of worth here in the very near future. 

Chart: